Adidas names Henkel's Rorsted to replace Hainer as CEO

International Business

Mon, 18 Jan 2016

Reuters

BERLIN: Adidas has named Henkel's Kasper Rorsted as its new chief executive, boosting its shares as investors expressed hopes that the Dane has the credentials to boost profits at the German sportswear firm.

Rorsted, 53, will leave Henkel in April after eight years at the consumer goods firm and take charge of Adidas on Oct. 1, succeeding Herbert Hainer, 61, who has headed the firm for 15 years as the longest-serving boss of a leading German company.

Hainer had come under fire as Adidas has lost market share to Nike, particularly in the key U.S. market, and suffered from falling golf sales and its exposure to Russia, prompting the board to launch a search for a successor.

Adidas shares were up 5.8 per cent by 1400 GMT, while Henkel was down 4.5 per cent.

"The share price reaction speaks for itself," said Ingo Speich, a fund manager at Union Investment, which owns a 0.7 per cent stake in Adidas.

"We welcome the appointment of Mr Rorsted to replace Mr Hainer and hope it means an end to the long dry spell in the profitability of Adidas," added Speich, who has long been critical of the Adidas CEO.

Adidas sales have more than doubled under Hainer but they have failed to match Nike, which forecasts revenue will rise another 63 per cent to $50 billion by 2020, compared to the Adidas target of 22 billion euros ($24 billion).

Hainer has also struggled to improve profitability, with the Adidas operating margin of 6.6 per cent in 2014 still half that of Nike. In contrast, Henkel's adjusted operating margin rose to almost 16 per cent in 2014 from 10 per cent in 2008.

SUMMER HANDOVER

Hainer had cultivated potential internal successors, including brand chief Eric Liedtke, but several investors wanted an outsider who might be more likely to take tough decisions and potentially sell more non-core businesses.

Hainer has said he is considering selling the struggling Taylor Made golf business, but has repeatedly rejected calls from some investors to sell the Reebok fitness brand he bought in 2006, saying the business was now growing fast.

Reuters reported last year that Egyptian tycoon Nassef Sawiris has formed a partnership with U.S. investor Mason Hawkins and his Southeastern Asset Management to drive boardroom change at companies including Adidas. Southeastern declined to comment on Rorsted's appointment.

Adidas said Rorsted would join the executive board on Aug. 1 and have a two-month transition period with Hainer during a busy period for the sporting goods industry, just after the European soccer championships and just before the Olympics in Rio.

Since Rorsted took over at Henkel in 2008, shares in the maker of Schwarzkopf hair care products and Loctite glue have more than tripled, while its annual sales have grown by more than a third to around 18 billion euros estimated for 2015.

Rorsted has a reputation as a dynamic manager with a relentless focus on improving profitability, but, like Hainer at Adidas, faced challenges in the United States, the company's biggest market, where competition from the likes of Procter & Gamble and Unilever is fierce.

In response, Rorsted, who says he spends 200 days of the year travelling, has overhauled management in the U.S. market, where Henkel has also launched products popular in Europe - Persil laundry detergent and Schwarzkopf shampoo.

Rorsted was widely seen as seeking a new challenge after Henkel last year lost out to to Coty Inc in a bid to buy hair care firm Wella from Procter & Gamble.

Rorsted, who is known as a keen skier and fan of soccer club Bayern Munich, is married with four children and his family already live in Munich, meaning he will have less far to commute to his new job in the northern Bavarian town of Herzogenaurach.

He serves on the boards of German media company Bertelsmann, Denmark's Danfoss and brewer Anheuser-Busch InBev and, before Henkel, he worked for Hewlett Packard, Compaq and Oracle, living in Germany since 1991.

Hans Van Bylen, a Belgian who has worked at Henkel since 1984 and who has headed the beauty care business since 2005, will take over as Henkel CEO on May 1, the company said, adding it would name a successor for Van Bylen in due course.